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gregh1 said:
Felt like a pump and dump but the dump took a long time.
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Bitcoin is not a pump and dump. It has been around too long and is a part of too many institutional portfolios to describe it that way.

It is a speculative asset. But it is not a pump and dump. It goes up and down in value all the time. This is neither the first nor the last time that it will have swings of 20% up and down in a short period of time.
 
superrific said:
There's nothing to understand. The non-speculative value of a bitcoin is precisely zero. It has no intrinsic value (i.e. holding it generates no returns), and it has no option value (empty, undeveloped land has no current value but could have value in the future). So they are making it all up.

The only thing that drives bitcoin prices up is money flowing in. If enough money flows into bitcoin, it will trade for $1M but apparently we are not at that point.
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What is the non-speculative value of 10 $100 bills? Those pieces of paper have no intrinsic value. It is worth $1,000 because people will exchange $1,000 of goods and services for those 10 pieces of paper.

If people are willing to provide you $90k of cash for one bitcoin, then it has $90k of value.
 
Calheel said:
What is the non-speculative value of 10 $100 bills? Those pieces of paper have no intrinsic value. It is worth $1,000 because people will exchange $1,000 of goods and services for those 10 pieces of paper.

If people are willing to provide you $90k of cash for one bitcoin, then it has $90k of value.
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That's circular. Anyway, the reason that cash has value is that you can pay your taxes with it. Indeed, have to pay your taxes with it. And because the government pays contractors in cash.
 
Paper currency has the full faith and credit of the United States of America behind it.

Look at it this way. I can write you a paper check for $1000 from Bank of America. That piece of paper I hand you is valueless except for the fact that the full faith and credit of the Bank of America says they will exchange that for you for $1000 of cash. That's analogous to US currency. Only the US government guarantees they will exchange their paper for $1000 of goods or services. This guarantee creates a market where we all can exchange goods and services for that paper, because no matter what, if no one else wants it, the US government has guaranteed they will take it. Not only that, it's the only damned thing they will take. There is always built in market guaranteed for that piece of paper.

Or I could give you a beanie baby with a subjective value of $1000 (it's the nineteen eighties, lets' say) and you can always hope that someone out there in the future will be willing to exchange a $1000 worth of goods or services for that for that beanie baby. That's analogous to crypto.
 
superrific said:
That's circular. Anyway, the reason that cash has value is that you can pay your taxes with it. Indeed, have to pay your taxes with it. And because the government pays contractors in cash.
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But a $100 bill has no intrinsic value. It fluctuates against a basket of other currencies based on how much the world demands it. That is basically the same as bitcoin. It has no intrinsic value other than the willingness of people to pay for it.
 
Yeah, but all of that begs the questions: What does faith mean? What does credit mean? What does "the government of the United States" mean? What does guarantee mean? Who, what and how gives meaning to all those words?
 
The Guardian view on crypto’s latest crash: it reveals who pays the price for a failing economy | Editorial | The Guardian The Guardian view on crypto’s latest crash: it reveals who pays the price for a failing economy | Editorial


The key to understanding crypto is that it has no “value” in any economic sense. It generates no income, commands no productive capacity and pays no dividends. Unlike state money, it is not backed by a tax base or a fiscal authority. What props up its price is not cashflow but expectation: the hope that someone else will validate today’s valuation tomorrow. When sentiment turns sour or people pull their money out, there is nothing to break cryptocurrencies’ fall. Prices don’t correct, they collapse. In 2023, MPs rightly said that cryptocurrency trading in the UK should be regulated as a form of gambling – a demand rejected by the then Tory government.
 
Calheel said:
But a $100 bill has no intrinsic value. It fluctuates against a basket of other currencies based on how much the world demands it. That is basically the same as bitcoin. It has no intrinsic value other than the willingness of people to pay for it.
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You're smarter than this. The bill is given intrinsic value by the US government, which has said that the piece of cloth is worth that much money. And you can pay your taxes with it. In terms of international trade, exchange rates are not primarily set by supply and demand for dollars. They are set by supply and demand of imports, exports and capital flows.

I say bitcoin has no value because I have never heard any real answer to the question: without looking at a price chart, tell me what price bitcoin should trade at. Or another version of that same question: how do you know whether bitcoin is over- or under-valued. Should bitcoin trade at $1000? It has no return on investment, so if you don't know how much it has been worth historically, you don't know how much it should be worth today. Actual assets aren't like that. I don't need a stock chart to estimate the value of a share of stock -- it might not be terribly accurate without projections, but I can arrive at a ballpark number. Debt is even easier. Real estate can be measured by rents (again, not terribly accurately but there's at least a number). If someone offers me $1M for my house, I know that I should sell, and I know I should tell anyone offering $250K to take a hike. How do you do that with crypto?

I suppose you could argue that inherent volatility gives it some option value, but that would only be true at far lower prices than it trades at today. For volatility alone to give option value, the volatility has to push the lower limit -- a strike price or, in this case, zero. Otherwise, it's just speculation and corruption.
 
superrific said:
You're smarter than this. The bill is given intrinsic value by the US government, which has said that the piece of cloth is worth that much money. And you can pay your taxes with it. In terms of international trade, exchange rates are not primarily set by supply and demand for dollars. They are set by supply and demand of imports, exports and capital flows.

I say bitcoin has no value because I have never heard any real answer to the question: without looking at a price chart, tell me what price bitcoin should trade at. Or another version of that same question: how do you know whether bitcoin is over- or under-valued. Should bitcoin trade at $1000? It has no return on investment, so if you don't know how much it has been worth historically, you don't know how much it should be worth today. Actual assets aren't like that. I don't need a stock chart to estimate the value of a share of stock -- it might not be terribly accurate without projections, but I can arrive at a ballpark number. Debt is even easier. Real estate can be measured by rents (again, not terribly accurately but there's at least a number). If someone offers me $1M for my house, I know that I should sell, and I know I should tell anyone offering $250K to take a hike. How do you do that with crypto?

I suppose you could argue that inherent volatility gives it some option value, but that would only be true at far lower prices than it trades at today. For volatility alone to give option value, the volatility has to push the lower limit -- a strike price or, in this case, zero. Otherwise, it's just speculation and corruption.
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$100 bill has value because government says so
1 bitcoin has value because market says so.

There really is very little difference between these two things, especially when you are dealing with a fiat currency like the dollar. The dollar has value because people believe in the US. Bitcoin has value because people believe it has value.

The two things are not that different. At least when it comes to your concept of intrinsic value.

Obviously, bitcoin is much more speculative than the dollar. But in both cases, they have value because people think they have value.
 
Calheel said:
$100 bill has value because government says so
1 bitcoin has value because market says so.

There really is very little difference between these two things, especially when you are dealing with a fiat currency like the dollar. The dollar has value because people believe in the US. Bitcoin has value because people believe it has value.

The two things are not that different. At least when it comes to your concept of intrinsic value.

Obviously, bitcoin is much more speculative than the dollar. But in both cases, they have value because people think they have value.
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If that is the case then why do you have to change Bitcoins to dollars to buy anything aside from a minute amount of internal Bitcoin transactions many if not most of which are illegal, scams, money laundering, tax evasion or other nefarious purposes. If Bitcoin were a true currency and not a speculative asset it would not have lost 25% of its value the last 6 weeks. The economy would have imploded had that happened to the dollar. You are being sold a fantasy by people who want you to ultimately buy their digital ones and zeroes for more than they paid for them. The minute quantum computing breaks the blockchain it will be worth zero.
 
Calheel said:
$100 bill has value because government says so
1 bitcoin has value because market says so.

There really is very little difference between these two things
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There is an extraordinary difference between those two things. Like the difference between the Soviet Union and the USA.
 
uncgriff said:
If that is the case then why do you have to change Bitcoins to dollars to buy anything aside from a minute amount of internal Bitcoin transactions many if not most of which are illegal, scams, money laundering, tax evasion or other nefarious purposes.
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This. If there was an actual bitcoin economy -- that is, goods that are produced start to finish in bitcoin, including payments to suppliers and workers -- then the analogy to currency would be stronger. But there isn't. So it's just a thick intermediate.
 
uncgriff said:
If that is the case then why do you have to change Bitcoins to dollars to buy anything aside from a minute amount of internal Bitcoin transactions many if not most of which are illegal, scams, money laundering, tax evasion or other nefarious purposes. If Bitcoin were a true currency and not a speculative asset it would not have lost 25% of its value the last 6 weeks. The economy would have imploded had that happened to the dollar. You are being sold a fantasy by people who want you to ultimately buy their digital ones and zeroes for more than they paid for them. The minute quantum computing breaks the blockchain it will be worth zero.
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Bitcoin is NOT a currency. My point was responding to Super's argument about "intrinsic value." There are plenty of assets whose value is derived from the demand of other people, not because of anything "intrinsic" to the the asset.

And I am not being sold anything. I don't own any bitcoin and I never have.

But just because crypto bros are annoying does not mean that bitcoin is a pump and dump. There are certainly crypto assets that are pump and dumps, but bitcoin is not one of them. It is much too well established and too widely owned for that to be an accurate description.
 
Calheel said:
Bitcoin is NOT a currency. My point was responding to Super's argument about "intrinsic value." There are plenty of assets whose value is derived from the demand of other people, not because of anything "intrinsic" to the the asset.
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Only collectibles, and their status as assets is often questionable.

This is quite basic. If something has no intrinsic value, then why are people paying you money for it? Because they think they can peddle it to someone else, which is the definition of a bubble.
 
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